Customers will no longer get insurance covers bundled with mutual funds, and many savings and investment products offered by banks. They may, however, continue to buy insurance with home loans and credit cards.
After a current argument with mutual fund companies which wanted to collect insurance premium by hawking policies along with their schemes, life insurers decided to end the system of bundling on a host of financial products.

The decisions taken by the Life Insurance Council is surprising as some of its members have a common parentage with asset management companies.

Prudential Life Insurance Managing Director Shikha Sharma stated: “We had a discussion within the ICICI group and decided that an insurance cover should not be bundled with mutual fund schemes.”

SB Mathur, secretary general of the Life Insurance council said: “As an industry, we have developed a consensus that we will not offer insurance covers on savings and investment products offered by entities that will directly compete with us. However, we will continue to offer insurance covers on credit cards, loans and liability products and those products, which do not compete with our products.”

Life insurers have commented that the present insurance regulations require them to maintain a solvency margin of 150%, which is much higher than the capital requirement norms for fund houses.